<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended SEPTEMBER 30, 1996
----------------------------
OR\
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ____________________ to _____________________
Commission file number 0-26368
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TRANSMEDIA ASIA PACIFIC, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 13-3760219
---------------------- -----------------
(State or other jurisdiction (I.R.S. Employer
of incorporation of organization Identification No.)
11 ST. JAMES'S SQUARE, LONDON SW1Y 4LB, ENGLAND
---------------------------------------------------
(Address of principal executive offices) (zip code)
U.K. 011-44-171-930-0706
-------------------------------
(Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
Title of each class Name of each exchange
------------------- on which registered
-------------------------
NONE [NONE]
Securities registered pursuant to Section 12 (g) of the Act:
COMMON STOCK, PAR VALUE $.00001 PER SHARE
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of December 18, 1996 was: $10,705,457 based upon the last sales
price of a share of Common Stock on the Nasdaq SmallCap market.
Number of shares outstanding of Registrant's Common Stock, as of December 18,
1996: 13,918,697
DOCUMENTS INCORPORATED BY REFERENCE:
Location in Form 10-K in
which
Document Document is Incorporated
-------- ------------------------
Registrant's Proxy Statement Part III
relating to the 1997
Annual Meeting of
Stockholders
<PAGE> 2
PART I
ITEM 1 - BUSINESS
BACKGROUND
Transmedia Asia Pacific, Inc. is a Delaware Corporation which was formed in
March 1994 and began business operations in Sydney, Australia in November 1994.
As used in this Report, the term "Company" includes Transmedia Asia Pacific Inc.
and its subsidiaries unless otherwise indicated. On May 2, 1994 the Company
acquired from Conestoga Partners II, Inc. ("Conestoga") the rights Conestoga had
previously acquired from Transmedia Network, Inc. ("Network"), an independent
company which owns approximately 4% of the Company, through Network's affiliate
TMNI International Inc. ("TMNI"), pursuant to a Master License Agreement
("License Agreement") dated March 21, 1994. The rights acquired were an
exclusive license (the "License") to use certain trademarks and service marks,
proprietary computer software programs and know-how of Network in establishing
and operating a discount restaurant charge card business in essentially all the
countries in Asia and the Pacific Rim including Japan, China, Hong Kong, Taiwan,
Korea, The Philipines and India (the "Licensed Territories").
All references to $'s and dollars relate to US $'s, unless otherwise stated.
BUSINESS ACTIVITIES
The business of the Company is the exploitation of the rights acquired under the
License Agreement. The Company is currently operating in Australia and plans in
the future to develop the License within the Licensed Territories directly,
through subsidiaries, and through the sale of sub-licenses and franchises to
others.
The Company advances money to restaurants selected by it which agree to become
participating restaurants ("Company Participating Restaurants") in exchange for
food and beverage credits, typically in the ratio of $2 of food and beverage
credits for every $1 advanced. The Company recovers its advances ("Restaurant
Credits") from food and beverages purchased net of taxes and service ("Food and
Beverage Credits") from Company Participating Restaurants, by cardholders
("Company Cardholders") who complete applications to become holders of the
restaurant card ("The Restaurant Card") offered by the Company and are accepted.
The Company keeps a current record of the amount of Food and Beverage Credits
outstanding at each Company Participating Restaurant. As food and beverages are
consumed by Company Cardholders at Company Participating Restaurants by such
Company Cardholders charging the retail price of such food and beverages with
The Restaurant Card, the Food and Beverage Credits outstanding are reduced and
the Restaurant Credits outstanding are also reduced by one-half of such Food and
Beverage Credits used.
Each Company Cardholder receives on each purchase a credit equal to 20% or 25%
of the Food and Beverage Credits used. The Company Participating Restaurant is
paid its taxes and service by the Company from a portion of the proceeds
received by the Company from the payment by a Company Cardholder of the amount
charged on The Restaurant Card. The Company retains the balance which reduces
the Restaurant Credits by approximately 50% of the Food and Beverage Credit
used. The Company pays a royalty of 2% of Food and Beverage Credits used to
Network and 2% of Food and Beverage Credits used as sales commissions.
The Restaurant Card is a discount restaurant charge card used by a Company
Cardholder in lieu of a major credit card to charge food and beverages purchased
at a Company Participating Restaurant. The Restaurant Card charges are
transferred to the major credit card used by the Company Cardholder as listed in
his application for the Restaurant Card. The full amount of the charge is listed
on the major credit card bill along with a separate credit equal to 20% or 25%
of the cost of food and beverages at a Company Participating Restaurant
(excluding taxes and service). As at December 18, 1996, the Company had
approximately 420 Company Participating Restaurants and approximately 22,000
Company Cardholders. Company Cardholders either have a 20% free membership card
or a 25% membership card with an annual fee of 70 dollars (Australian), up to
six months of which is waived in most instances or is otherwise shared with the
entity which assists in obtaining the new account for up to the first six
months. The Company has recently launched a 20% free membership card with
Westpac Banking Corp as joint marketing partner.
The Company receives its revenues from (a) the difference between the amount of
its Restaurant Credits to Company Participating Restaurants and Food and
Beverage Credits used at Company Participating Restaurants by Company
Cardholders, net of the 25% discount to Company Cardholders, the Network royalty
and sales commissions, (b) annual membership fees and renewal fees of Company
Cardholders, and (c) sub-license and franchise fees when and if received by the
Company from future franchises and sub-licenses, net of minimum up-front
payments to Network with regard to such franchises and licenses.
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<PAGE> 3
The Company launched The Restaurant Card in Sydney, Australia, through a
promotional campaign with the Sydney Morning Herald in November 1994. In
September 1995 the Company launched in Melbourne, Australia with The Age
newspaper. More recently the Company has launched in Brisbane and the Gold
Coast, Australia. The Company is in the process of developing additional
campaigns to attract new Company Cardholders. Any campaign is likely to involve
the waiver of the annual fee for some limited period of time, typically up to a
maximum of 6 months. In addition dining bonuses, typically $20 (Australian) may
be granted as an inducement. Given the Company's operating structure the cost to
the Company is only half the amount of the bonus granted.
Network, from whose affiliate, TMNI, the License was granted and on whose
business the Company's operations are modelled, is a publicly traded company
operating in the United States both directly and through licensees and
franchisees. Under the License the Company is authorized to engage in business
within the Licensed Territories in the same manner as Network operates in the
United States, except that under the License Agreement the Company must pay
certain royalties to Network based both on operations and the sale of license
rights and must get the approval of Network for certain changes in key
executives and principal shareholdings.
Network owns 590,790 shares of the Company's common stock, which it acquired as
partial consideration for the sale of the License to the Company, and has the
right to designate one director of the Company, which right is not currently
being exercised. The Company has no ownership interest in Network.
In December 1996 Network and TMNI agreed, at the Company's request, to amend the
License. The principal revisions are that the Company is now permitted to expand
into new businesses, acquire Countdown PLC and undertake a corporate
restructure. In consideration a $750,000 fee will be payable when, and if, the
acquisition of Countdown PLC is completed and a $250,000 fee will be payable
when, and if, a corporate restructuring is completed.
Company Cardholders and Cardholders of Network and its franchisees are able to
use The Restaurant Card to purchase meals in all territories covered by the
Company, Network and its franchisees. The Company will realise all financial
benefits from meals consumed within the Licensed Territories and no financial
benefit from meals consumed outside of the Licensed Territories.
Transmedia Europe, Inc. ("Transmedia Europe"), of which Edward Guinan III,
President of the Company, is the principal shareholder and an officer and
director, owns an equivalent license from TMNI covering all the countries in
Europe, Turkey and the other countries outside of Europe that were formerly part
of the Union of Soviet Socialist Republic. Transmedia Europe commenced
operations in the United Kingdom in January 1994 and has obtained approximately
48,000 cardholders since its launch.
TRANSACTION ILLUSTRATION
The following is a descriptive illustration of a hypothetical transaction by a
Company Cardholder at a Company Participating Restaurant.
The Company, through a commissioned sales representative, recruits Restaurant A,
a full service restaurant , as a Company Participating Restaurant. The Company
grants Restaurant Credits in the amount of 3,000 dollars which entitles the
Company to collect the proceeds from 6,000 dollars of Food and Beverage Credits
charged by Company Cardholders on The Restaurant Card at Restaurant A. John
Smith, a Company Cardholder, enjoys a meal at Restaurant A and pays the 100
dollar check (consisting of 80 dollars for food and beverages and 20 dollars for
taxes and service) with The Restaurant Card. Mr Smith presents The Restaurant
Card. Restaurant A delivers The Restaurant Card receipt for Mr Smith's meal to
the Company for processing through the Major Credit Card Account designated by
Mr Smith in The Restaurant Card application and for payment. The Company
utilizes 80 dollars of Restaurant A's Food and Beverage Credits (for which it
has made Restaurant Credits of 40 dollars and reduces the Restaurant Credits due
to it from Restaurant A by 40 dollars. The Company then submits a credit to Mr
Smith's Major Credit Card Account in the amount of 20 dollars (representing 25%
of the 80 dollars of food and beverages consumed). Upon receipt of The
Restaurant Card receipt of Mr Smith of 100 dollars, the Company forwards 20
dollars of this amount (representing the tax and service portion of Mr Smith's
meal check) to Restaurant A.
The Company forwards 1.60 dollars as a royalty to Network (2% of the 80 dollars
of Food and Beverage Credits used) and keeps 58.40 dollars. This compares with
Restaurant Credits made by the Company of 40 dollars to Restaurant A and the 80
dollars of Food and Beverage Credits utilized in providing Mr Smith his meal.
The Company is responsible for paying the commissions of its sales
representatives whose commissions are currently 2% of Food and Beverage Credits
used.
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The allocation of the hypothetical 100 dollars check can be summarized as
follows:
<TABLE>
<CAPTION>
Name Amount Received Nature of Allocation
- ---- --------------- --------------------
<S> <C> <C>
Mr Smith 20 dollars 25% of food and beverage charges
(exclusive of tip and taxes) credited to
his Major Credit Card account.
Restaurant A 20 dollars Payment of service and taxes.
Restaurant A -0- The Restaurant Credits due to the
Company by Restaurant A are reduced
by 40 dollars.
Network 1.60 dollars A royalty fee of 2% of the 80 dollar
of Food and Beverage Credits
used is payable to Network.
The Company 58.40 dollars This represents a reduction of
Restaurant Credits by 40 dollars
plus 18.40 dollars of gross profit.
From this amount a sales representative
of the Company will typically receive a
commission of 2% of Food and
Beverage Credits used or in this
example 1.60 dollars.
</TABLE>
EMPLOYEES
As of December 18, 1996, the Company employed 19 persons, none of whom are
affiliated with a union. The Company believes that its relationship with its
employees is good.
COMPETITION
The charge card business, including the discount restaurant card business, is
highly competitive, both internationally and in Australia. The Company will be
competing to enrol Company Participating Restaurants and Company Cardholders
against other discount programs. Competitors include discount programs offered
by major credit card companies such as American Express, as well as Visa,
Mastercard and Diners Club. Moreover, other companies offer different kinds of
discount marketing programs relating to sales at their own outlets. Many of the
Company's competitors are larger than the Company and have substantially greater
financial, personnel, technological, marketing, administrative and other
resources than the Company.
The Company believes that the unique feature of The Restaurant Card is that it
can be used by Company Cardholders at Company Participating Restaurants with
virtually no restrictions, that The Restaurant Card provides substantial savings
without the need for a Company Cardholder to present discount coupons when
paying for a meal, and that Company Participating Restaurants are provided with
cash in advance of customer charges. The Company believes that all these
features contribute to the Company's competitiveness. Although the Company is
not aware of any discount programs, restaurant financing business or discount
restaurant charge card business in any of the areas in the Licensed Territories,
there is no guarantee that others will not offer, in the future, similar
services in any of the Licensed Territories.
The Company also believes that advertising and promotion, which will require
significant cash outlays, will be necessary to maintain competitiveness.
However, competitive pressure may require significant additional cash
expenditures for advertising and promotion, the amount and timing of which may
be dictated in part by the marketing policies of competitors. If the revenues
from the Company's operations are insufficient to permit management to match
promotional campaigns of competitors, the number of Company Cardholders and
Company Participating Restaurants in the Licensed Territory may decline, with a
resulting adverse effect on the Company's financial condition.
GOVERNMENT REGULATION
The Company believes that it possesses all governmental permits or licenses
necessary to operate in Australia. However, it does not possess any governmental
permits or licenses for other portions of the Licensed Territories and has not
inquired yet whether any permits or licenses will be required. In the event
permits or licenses are
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<PAGE> 5
necessary for the conduct of the Company's business in other portions of the
Licensed Territories, or that additional licenses or permits are required in
respect of operations in Australia, there is no guarantee that the Company will
be able to procure them, the failure of which could have a material adverse
effect on the Company's ability to operate or expand its operations in the
Licensed Territories.
ITEM 2 - PROPERTIES
The Company leases office space of approximately 2,500 square feet in Sydney at
19-31 Pitt Street. The lease is for a period of 6 years commencing August 31,
1994, at a net rental of approximately $80,514 per annum.
ITEM 3 - LEGAL PROCEEDINGS
As of the date of this Report there are no material legal proceedings pending
involving the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended September 30, 1996, no matters were submitted to a vote
of the security holders.
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<PAGE> 6
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON STOCK
EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information: Since August 4, 1995, shares of the Company's Common
Stock $.00001 par value (the "Common Stock") have traded on the Nasdaq
SmallCap Market (symbol "TMNA"). The following table sets forth, for the
periods indicated and as reported by the Nasdaq SmallCap Market, the high
and low sales prices for shares of the Company's Common Stock.
<TABLE>
<CAPTION>
Quarter Ended High Low
------------- ---- ---
<S> <C> <C>
September 30, 1995 $3 1/2 $1 1/2
December 31, 1995 $3 $1 9/16
March 31, 1996 $2 1/4 $1 3/8
June 30, 1996 $2 7/8 $1 1/16
September 30, 1996 $2 3/8 $ 7/8
September 30, 1996 through
December 18,1996 $1 5/8 $1
</TABLE>
(b) Holders of Common Stock: The number of stockholders of record for Common
Stock on December 18, 1996 was 220. The Company believes that there are a
significant number of additional beneficial owners of its Common Stock
whose shares are held in "Street Name".
(c) Dividends: The Company has never paid dividends with respect to the
Common Stock. The Company intends to retain future earnings, if any,
that may be generated from the Company's operations to help finance
the operations and expansion of the Company and accordingly does not
plan, for the foreseeable future, to pay dividends to holders of the
Common Stock. Any decision as to the future payment of dividends
will depend on the results of operations and financial position of
the Company and such other factors as the Company's Board of
Directors, in its discretion, deems relevant.
(d) Recent sales of unregistered securities: In August 1996 the Company
issued 892,857 shares of Common Stock for cash to one investor at a
price of $1.40 per share. In December 1996 the Company issued a
further 556,250 shares of Common Stock for cash to nine investors at
a price of $2.00 per share. With regard to both issues the Company
has claimed an exemption from the registration requirements of the
Securities Act of 1933, as amended ('Securities Act') by relying on
section 4 (2) of the Securities Act, which allows for an exemption
for transactions by an issuer not involving a public offering, and
the rules and regulations thereunder. No underwriter was involved
in these transactions.
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<PAGE> 7
ITEM 6 - SELECTED FINANCIAL DATA
The following table sets forth a summary of selected financial data for each of
the last three fiscal years. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements of the Company included in
this Report.
Income Statement Data
- ---------------------
<TABLE>
<CAPTION>
Period March
10, 1994
(inception) to
Fiscal Years ended September 30, September 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Total revenues $ 1,890,476 $ 1,103,081 $ --
Gross profit 791,810 400,358 --
Loss from operations (2,027,263) (2,075,747) (377,498)
Net loss $(2,006,258) $(1,990,288) $ (349,650)
Net loss per share $ (0.16) $ (0.17) $ (0.03)
</TABLE>
Balance Sheet Data
- ------------------
<TABLE>
<CAPTION>
As at September 30,
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Restaurant credits $ 636,808 $ 593,418 $ 61,129
Intangible assets 1,746,176 1,868,855 1,841,560
Total assets 3,954,947 4,312,460 4,164,997
Total liabilities 776,350 627,816 151,920
Total equity 3,178,597 3,684,644 4,013,077
Other Data
- ----------
Number of Participating
Restaurants 430 330 25
Number of Company Cardholders 18,000 9,000 --
</TABLE>
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<PAGE> 8
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The discussion and analysis of financial condition and results of operations
should be read in conjunction with the consolidated financial statements, the
related disclosures and the selected financial data.
The nature of the Company's business is such that there is a lead time before
profitable operations can be anticipated. This is demonstrated in the financial
results for the years ended September 30, 1996, 1995 and for the period ended
September 30, 1994. The success of the Company is dependent upon increasing the
number of Company Cardholders and Company Participating Restaurants, as well as
obtaining increased usage of The Restaurant Card by Company Cardholders. Our
joint venture marketing partners are predominantly large size organisations,
with lengthy internal procedures. Consequently preparing campaigns for launch
and the resulting anticipated increase in Company Cardholders is taking
considerably longer than was initially anticipated. As of December 18, 1996 the
Company had approximately 22,000 Company Cardholders and 420 Company
Participating Restaurants.
Certain statements in this Report under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, including, without limitation,
statements regarding future cash requirements. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause
the actual results, performance or achievements of the Company, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: the loss of a large number of
Company Cardholders or Company Participating Restaurants; general economic and
business conditions; industry capacity; industry trends; demographic changes;
competition; changes in business strategy or development plans; quality of
management; availability, terms and deployment of capital; business abilities
and judgment of personnel; availability of qualified personnel; changes in, or
the failure to comply with, government regulations; and other factors referenced
in this Report.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1995 COMPARED TO PERIOD FROM MARCH 10, 1994
(INCEPTION) TO SEPTEMBER 30, 1994
Revenues, exclusive of membership fees of $27,564 for the year ended September
30, 1995 amounted to $1,075,517. Revenues represent the retail value of food and
beverages consumed by Company Cardholders at Company Participating Restaurants,
less the 25% discount that is granted to Company Cardholders. Cost of sales is
approximately 50% of the retail value of the food and beverages consumed by
Company Cardholders and represents the recovery of the Restaurant Credits made
by the Company to the respective Company Participating Restaurants. The gross
profit of $400,358 for the year amounts to 25% of the full retail value of the
food and beverages consumed by Company Cardholders, together with a pro rata
portion of membership fees and other income. The Company acquired 9,000
Cardholders during the year ended September 30, 1995. The Company increased its
number of Participating Restaurants from 25 to 330 at September 30, 1994 and at
September 30, 1995 respectively.
The Company began generating revenues from operations in November 1994 as
management began recruiting Company Cardholders. Revenues increased
significantly on a monthly basis from November 1994 to May 1995 as the Company
increased its base of Company Cardholders as a result of the Sydney Morning
Herald promotion and also increased the number of Company Participating
Restaurants. It is anticipated that the September 1995 launch of the Restaurant
Card in Melbourne in The Age newspaper will have an effect on revenues and
cardholder numbers. The Company's revenues are generated primarily from the
usage of The Restaurant Card. Accordingly, the Company has marketing programs
which are intended to increase the frequency of use of The Restaurant Card in
addition to obtaining new Company Cardholders.
Cost of sales amounted to $703,203 for the year ended September 30, 1995. Cost
of sales are approximately 50% of the gross food and beverages value consumed by
Company Cardholders and represents the recovery of the restaurant credits made
by the Company to the respective Company Participating Restaurants.
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<PAGE> 9
Selling, general, and administrative expenses amounted to $2,476,105 and
$377,498 for the year ended September 30, 1995 and the period ended September
30, 1994, respectively. Selling, general, and administrative expenses consist
primarily of salaries, rents, commissions, and other general overhead costs and
for fiscal 1995 include the costs of the first full year's operation in addition
to costs relating to the registration of the Company's Common Stock under the
Securities Act of 1933.
The Company earned $85,459 and $34,148 for the year ended September 30, 1995 and
the period ended September 30, 1994, respectively, from the temporary investment
of excess cash funds. The Company was in a net operating loss carry forward
position for income tax purposes however no tax benefit was recognised in the
1995 fiscal year.
YEAR ENDED SEPTEMBER 30, 1996 COMPARED TO YEAR ENDED SEPTEMBER 30, 1995
The Company generated revenues of $1,659,515 (an increase of 54% over 1995) for
the year ended September 30, 1996. The increase in revenues can be principally
attributed to the September 1995 launch in Melbourne with The Age newspaper. The
Company has been well received by the Melbourne restaurant community, having
attracted a number of award winning restaurants as Company Participating
Restaurants. This success has subsequently been repeated in Brisbane, with
approximately 50% of the Company Participating Restaurants receiving awards in
the Queensland State Premier's 1996 annual tourist awards. The Company increased
its number of Cardholders from 9,000 to 18,000 at September 30, 1995 and at
September 30, 1996 respectively, largely as a result of the 10,000 Company
Cardholders produced by the Westpac Banking Corp campaign since August 1996. The
Company increased its number of Participating Restaurants from 330 to 430 at
September 30, 1995 and at September 30, 1996 respectively. Membership fees for
the year ended September 30, 1996 of $230,961 are significantly greater than the
$27,564 reported for 1995 and are as a result of the Company billing Company
Cardholders for the first time following the typically waived membership period.
Cost of sales amounted to $1,098,666 (an increase of 54% over 1995) for the year
ended September 30, 1996, in line with the 54% increase in revenues. Cost of
sales are approximately 50% of the gross food and beverages value consumed by
Company Cardholders and represents the recovery of the restaurant credits made
by the Company to the respective Company Participating Restaurants.
Selling, general and administrative expenses, consisting primarily of the costs
of operations, for the year ended September 30, 1996 amounted to $2,819,073
representing an increase of 14% over 1995. During the year significant savings
have been achieved in printing costs.
The Company earned $21,005 for the 1996 fiscal year from the temporary
investment of excess cash funds. The Company remains in a net operating loss
carry forward position for income tax purposes and no tax benefit has been
recognised for the year ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company was initially capitalized with 7,249,500 shares. On May 26, 1994,
the Company issued: (i) 450,000 shares of common stock to Conestoga for
$450,000; (ii) 590,790 shares were issued to Network as partial consideration
for the purchase of the License; and (iii) 3,525,000 shares were sold to private
investors in a private placement at an offering price of $1 per share. Of the
cash proceeds of $3,525,000, $1,000,000 was paid to Network for further
consideration (in addition to the $250,000 paid to Network by Conestoga and
reimbursed to Conestoga by the Company) for the purchase of the License from the
private placement of shares, leaving a balance, after costs, of $2,322,212
available to the Company for use as working capital in respect of the
utilization by the Company its rights under the License, Initially such
utilization has taken place in Australia through the Company's wholly owned
subsidiary, Transmedia Australia Pty Limited. In the future, the Company may
expand operations in other portions of the Licensed Territories through
wholly-owned subsidiaries or through unaffiliated sublicensees and franchisees.
In April 1995, the Company completed a second private placement of 673,800
shares of Common Stock at a price of $3 per share. The net proceeds of such
private placement were used as working capital in respect of the utilization by
the Company of its rights under the License. The net cash to the Company from
the second private placement of shares in April 1995 was $1,892,656.
In July 1996 the Company issued 892,857 shares of Common Stock at a price
of $1.40 per share. The net proceeds of $1,235,000 have been used to
provide working capital to existing operations. In December 1996
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<PAGE> 10
the Company issued 556,250 shares of Common Stock at a price of $2.00 per share.
The net proceeds of $1,097,500 will be used to provide working capital to
existing operations.
Net cash used in operating activities for the years ended September 30, 1996,
1995 and 1994 were $1,583,819, $2,045,395 and $349,014, respectively, of which
$98,997, $572,707 and $50,025, respectively, represents the net cash outflow for
advances to Company Participating Restaurants. These cash outflows were funded
by the 1994 issue of common stock which generated $2,031,097, the 1995 issue of
6 1/2% Convertible Preferred Stock and the 1996 issue of Common Stock.
The Company made investments of $150,000 to extend the option to licence the
sole Transmedia Franchise in the Sate of Hawaii and $1,000,000 to acquire the
License during the year ended September 30, 1995 and period ended September 30,
1994, respectively. In addition, there were cashflows due from/(to)
related parties of $663,930, $(424,437) and $(89,672) for the years ended
September 30, 1996, 1995 and period ended September 30,1994, respectively.
On June 16, 1995 the Company entered into an agreement with Nomura,
Wassertein, Perella and Co. Ltd. to provide certain consulting services
through June 16, 1996. Pursuant to such agreement, the Company has issued
100,000 shares of common stock and paid a $100,000 retainer to Nomura,
Wasserstein, Perella and Co. Ltd.
The cash resources of the Company will be used to provide Restaurant Credits to
Company Participating Restaurants in the Licensed Territories, and to pay for
general and administrative expenses, including officers' compensation and
compensation to independent sales consultants for the recruitment of Company
Participating Restaurants, and Company Cardholders.
The Restaurant Credits are generally unsecured and are recoverable only as
Company Cardholders utilise The Restaurant Card at the respective Company
Participating Restaurant. In a small number of cases, the Company may request a
personal guarantee from the owner.
Generally, no other forms of collateral or security are obtained from restaurant
owners. Recovery of Restaurant Credits as well as generation of gross profit
from operations is strongly dependent upon the frequency of use by existing
Company Cardholders of The Restaurant Card. Losses from restaurant failures have
not been significant in the limited operating experience of the Company.
The Company has not made any significant capital commitments other than the
commitments made under the License. The Company does not have an immediate plan
to make other significant capital commitments related to the operation of its
business in Australia.
Although the Company anticipates that its current cash, together with revenues
expected to be derived from operations, should, based upon its internal
calculations, be sufficient to fund operating, and other capital needs for the
next year, the Company will be required to seek additional financing during such
period in the event it either intends to make acquisitions or that there are
delays, cost overruns, sales declines or unanticipated expenses. While the
Company is confident that sufficient funds will be available to meet its
anticipated business expansion needs during the next year there can be no
assurance that the Company will be able to obtain such additional financing
during such 12 month period.
The Company is currently in negotiations to commence operations in a new
country in the Asia Pacific region.
INFLATION AND SEASONALITY
The Company does not believe that its operations will be influenced by inflation
in the foreseeable future. The business of individual Company Participating
Restaurants may be seasonal depending on their location and the type of food and
beverages served. However, the Company at this time has no basis on which to
project seasonal effects, if any, to its business as a whole.
-9-
<PAGE> 11
ITEM 8 - FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants F1 - F2
Consolidated Balance Sheets F3 - F4
September 30, 1996 and 1995
Consolidated Statements of Operations F5
for the years ended September 30, 1996 and
1995 and for the period from March 10, 1994
(inception) to September 30,1994
Consolidated Statements of Changes in Stockholders' Equity F6
for the years ended September 30, 1996 and
1995 and for the period from March 10, 1994
(inception) to September 30, 1994
Consolidated Statements of Cash Flows F7
for the years ended September 30, 1996
and 1995 and for the period from March 10, 1994
(inception) to September 30, 1994
Notes to the Consolidated Financial Statements F8 - F17
</TABLE>
-10-
<PAGE> 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Transmedia Asia Pacific, Inc.
We have audited the accompanying consolidated balance sheet of Transmedia Asia
Pacific, Inc. and subsidiary as of September 30, 1996 and the related
consolidated statements of operations, changes in stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material mis-statement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Transmedia Asia Pacific, Inc. and subsidiary as of September 30, 1996, and the
results of their operations and cash flows for the year then ended in conformity
with generally accepted accounting principles in the United States.
December 20, 1996 KPMG
London
England
F 1
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Transmedia Asia Pacific, Inc.
We have audited the accompanying consolidated balance sheet of Transmedia Asia
Pacific, Inc. and subsidiary as of September 30, 1995 and the related
consolidated statement of operations, changes in stockholders' equity, and cash
flows for the year ended September 30, 1995, and for the period from March 10,
1994 (inception) through September 30, 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material mis-statement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Transmedia Asia Pacific, Inc. and subsidiary as of September 30, 1995, and the
results of their operations and cash flows for the year ended September 30, 1995
and for the period from March 10, 1994 (inception) through September 30, 1994 in
conformity with generally accepted accounting principles in the United States.
Arthur Andersen
Sydney
Australia
December 20, 1995
F 2
<PAGE> 14
TRANSMEDIA ASIA PACIFIC, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
30, 30,
1996 1995
--------- ---------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash (including temporary cash investments $1,171,305 $ 941,098
of $1,055,934 at September 30, 1996 and
$756,608 at September 30, 1995)
Restaurant credits (net of allowance for 636,808 593,418
irrecoverable credits of $119,762 at
September 30, 1996 and of $40,418 at
September 30, 1995)
Trade accounts receivable 66,211 77,289
Amounts due from related parties (note 2) 48,857 619,277
Prepaid expenses and other current assets 142,127 70,748
---------- ----------
Total current assets 2,065,308 2,301,830
LONG TERM ASSETS
Property and equipment, net of accumulated
depreciation $77,616 at September 30, 1996 143,463 141,775
and $40,056 at September 30, 1995 (note 4)
Intangible assets, net of accumulated
amortization of $245,440 at September 30, 1,746,176 1,868,855
1996 and $122,720 at September 30, 1995 --------- ---------
(note 3)
TOTAL ASSETS $3,954,947 $4,312,460
========== ==========
</TABLE>
See accompanying notes to the consolidated financial statements.
F 3
<PAGE> 15
TRANSMEDIA ASIA PACIFIC, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER
30, 1996 30, 1995
------------- ---------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank overdraft $ 40,051 $ 126,148
Trade accounts payable 253,432 116,918
Deferred membership 139,215 128,990
Accrued liabilities (note 6) 250,352 255,760
Amount due to related parties (note 2) 93,300 --
----------- -----------
Total current liabilities 776,350 627,816
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 per value per share -- --
Authorized 5,000,000 shares; none issued
Common stock, $0.00001 par value per share
Authorized 20,000,000 shares;
13,362,447 issued and outstanding shares at
September 30, 1996 and 12,469,590 shares at 134 125
September 30, 1995
Additional paid in capital 7,470,749 6,235,758
Cumulative foreign currency translation 53,910 949
adjustment
Accumulated deficit (4,346,196) (2,339,938)
Unearned compensation - restricted stock -- (212,250)
----------- -----------
Total stockholders' equity 3,178,597 3,684,644
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,954,947 $ 4,312,460
=========== ===========
</TABLE>
See accompanying notes to the consolidated financial statements.
F 4
<PAGE> 16
TRANSMEDIA ASIA PACIFIC, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
PERIOD MARCH
10,1994
YEAR ENDED YEAR ENDED (INCEPTION)
SEPTEMBER SEPTEMBER TO SEPTEMBER
30, 1996 30, 1995 30, 1994
------------ ---------- ------------
<S> <C> <C> <C>
Revenues $ 1,659,515 $ 1,075,517 $ --
Membership fees 230,961 27,564 --
------------ ------------ ------------
Total revenues and fees 1,890,476 1,103,081 --
Cost of sales (1,098,666) (702,723) --
------------ ------------ ------------
Gross profit 791,810 400,358 --
Selling, general and administrative (2,819,073) (2,476,105) (377,498)
expenses
------------ ------------ ------------
Loss from operations (2,027,263) (2,075,747) (377,498)
Interest income 21,005 85,459 34,148
------------ ------------ ------------
Loss before income tax (2,006,258) (1,990,288) (343,350)
Income taxes (note 9) -- -- (6,300)
------------ ------------ ------------
Net loss $ (2,006,258) $ (1,990,288) $ (349,650)
============ ============ ============
Loss per common share $ (0.16) $ (0.17) $ (0.03)
============ ============ ============
Weighted average number of common
shares outstanding 12,618,400 12,082,691 10,827,193
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
F 5
<PAGE> 17
<TABLE>
<CAPTION>
TRANSMEDIA ASIA PACIFIC INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------------------------------------------------------
Number of Common Additional Cumulative Accumulated Unearned Total
common shares stock paid-in capital currency translation deficit compensation
adjustment
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock 11,815,790 $118 $ 4,565,897 $ -- $ -- $ -- $ 4,566,015
Issue costs -- -- (202,788) -- -- -- (202,788)
Net loss -- -- -- -- (349,650) -- (349,650)
Effect of foreign currency
translation -- -- -- (500) -- -- (500)
----------- ---- ----------- -------- ----------- --------- -----------
Balance, September 30, 1994 11,815,790 118 4,363,109 (500) (349,650) -- 4,013,077
Issuance of common stock 673,800 7 2,021,393 -- -- (300,000) 1,721,400
Issue costs -- -- (128,744) -- -- -- (128,744)
Net loss -- -- -- -- (1,990,288) -- (1,990,288)
Effect of foreign currency
translation -- -- -- 1,449 -- -- 1,449
Treasury stock (20,000) -- (20,000) -- -- -- (20,000)
Compensation expense -- -- -- -- -- 87,750 87,750
----------- ---- ----------- -------- ----------- --------- -----------
Balance, September 30, 1995 12,469,590 $125 $6,235,758 $ 949 $(2,339,938) $(212,250) $ 3,684,644
Issuance of common stock 892,857 9 1,249,991 -- -- -- 1,250,000
Issue costs -- -- (15,000) -- -- -- (15,000)
Net loss -- -- -- -- (2,006,258) -- (2,006,258)
Effect of foreign currency
translation -- -- -- 52,961 -- -- 52,961
Compensation expense -- -- -- -- -- 212,250 212,250
----------- ---- ----------- -------- ----------- --------- -----------
Balance, September 30, 1996 13,362,447 134 7,470,749 53,910 (4,346,196) -- 3,178,597
=========== ==== =========== ======== =========== ========= ===========
</TABLE>
F 6
<PAGE> 18
TRANSMEDIA ASIA PACIFIC, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
MARCH 10, 1994
YEAR ENDED YEAR ENDED THROUGH
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
- - Net loss $(2,006,258) $(1,990,288) $ (349,650)
Adjustment to reconcile net loss
to net cash used in operating activities:
- - Depreciation 35,539 31,479 8,475
- - Amortization of licence 122,720 122,720 --
- - Provision for irrecoverable restaurant credits 79,344 40,418 --
- - Amortisation of deferred compensation 212,250 87,750 --
Changes in assets and liabilities:
- - Trade accounts payable 131,837 116,918 --
- - Accrued liabilities (5,021) 128,198 52,122
- - Restaurant credits (98,997) (572,707) (50,025)
- - Prepaid expenses and other current assets (60,299) (138,873) (9,936)
- - Deferred membership fees 5,066 128,990 --
----------- ----------- -----------
Net cash used in operating activities (1,583,819) (2,045,395) (349,014)
Cash flows from investing activities:
- - Due from/(to) related parties 663,930 (424,437) (89,672)
- - Purchase of property and equipment (29,861) (49,599) (66,272)
- - Extension of Hawaii option -- (150,000) --
- - Cash element of license -- -- (1,000,000)
----------- ----------- -----------
Net cash provided by/(used in) investing activities 634,069 (624,036) (1,155,944)
Cash flows from financing activities:
- - Net proceeds received from issuance
of common stock 1,235,000 1,592,656 3,417,212
- - Bank overdraft (86,097) 126,148 --
- - Purchase of treasury stock -- (20,000) --
----------- ----------- -----------
Net cash provided by financing activities 1,148,903 1,698,804 3,417,212
Effects of foreign currency translation 31,054 (85) (444)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 230,207 (970,712) 1,911,810
Cash and temporary cash investments at
beginning of period 941,098 1,911,810 --
Cash and temporary cash investments ----------- ----------- -----------
at end of period 1,171,305 $ 941,098 $ 1,911,810
=========== =========== ===========
</TABLE>
Supplemental disclosures of cash flow information:
No amounts of cash were paid for interest or income taxes for each of the
periods presented
F 7
<PAGE> 19
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
(a) Description of business
Transmedia Asia Pacific, Inc. ("the Company") was incorporated in Delaware
on March 10, 1994. The main business activity of Transmedia Asia Pacific,
Inc. and its subsidiary (collectively the "Group") is to make 'cash
advances' to restaurants for food and beverage credits from certain
participating restaurants which are then recovered as Transmedia
cardholders utilize their restaurant charge card (see Note 1(c)).
Presently, the Company's sole area of operation is in Australia through
its wholly owned subsidiary Transmedia Australia Pty Limited.
The Company has been granted a license (the "Transmedia License") by TMNI
International Inc., an affiliate of Transmedia Network Inc. (collectively
"Network"), a corporation which is incorporated in the United States of
America. The license is to operate a specialized restaurant charge card
business in Australia and New Zealand with limited rights to sublicense
the Asia Pacific Region. The agreement to purchase the Transmedia License
was initially entered into by Conestoga Partners II Inc. ("Conestoga"), a
corporation which is related to the Company by virtue of the shareholding
in Conestoga held by Edward J. Guinan III, the Chairman of the Board,
Chief Executive Officer and Director of the Company (See Note 2).
The Company intends to expand operations in other portions of the licensed
territories through wholly-owned subsidiaries, unaffiliated sublicensees
and franchisees or through joint ventures.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of Transmedia
Asia Pacific, Inc. and its wholly-owned subsidiary Transmedia Australia
Pty Limited. Intercompany accounts and transactions have been eliminated.
(c) Restaurant Credits
Restaurant credits represent the total advances made to participating
restaurants less the amount by which these credits are recouped by the
Group as a result of Group cardholders utilizing their cards at
participating restaurants. The amounts by which such credits are recouped
amounts to approximately 50% of the retail value of food and beverages
consumed by cardholders. The Group reviews recoverability of credits and
establishes an allowance for credits to restaurants that have ceased
operations or whose credits may not be utilized by cardholders.
The funds advanced to participating restaurants are generally unsecured
and are recoverable as cardholders utilize their restaurant charge card at
the respective restaurant. In certain cases, the Group may request a
personal guarantee from the owner of a restaurant with respect of the
recoverability of the advance if the restaurant ceases operations or
ceases to be a participating restaurant. Generally, no other forms of
collateral or security are obtained from the restaurant owners.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation on property and
equipment is calculated using the straight-line method over the estimated
useful lives of the assets. The estimated useful lives of the Group's
property and equipment are as follows:
<TABLE>
<S> <C>
Furniture and Fixtures 5 years
Office Equipment 4-5 years
Computer Equipment 3-4 years
</TABLE>
F 8
<PAGE> 20
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
(e) Income Taxes
The Company recognises deferred tax liabilities and assets for the
expected future tax consequences of events that have been included in the
financial statements or tax returns. Accordingly, deferred tax liabilities
and assets are determined based on the difference between financial
statement and tax basis of assets and liabilities using enacted rates in
effect for the year in which the differences are expected to reverse. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. A
valuation allowance is established to reduce the deferred tax assets when
management determines it is more likely than not that the related tax
benefits will not be realised.
(f) Intangible assets
Intangible assets consist of the cost of the Transmedia License and
extension of the Hawaii Option. The Transmedia License represents the
consideration paid to Network in both cash and fair value of Company
shares for the Transmedia License to operate in the licensed territories
using the systems, procedures and 'know how' of the Transmedia business.
The Hawaii Option is an option to license the sole Transmedia Franchise in
the State of Hawaii. The option is exercisable by written acceptance and
payment of a franchise fee of a further $250,000, in addition to the
$150,000 paid in September 1995 extending the option to March 21, 1997.
The Company evaluates the carrying value of its investment in license
costs for impairment based on an estimate of future cash flows that are
expected to be generated and are directly attributable to the Transmedia
License. If the sum of the estimated future undiscounted cash flows is
less than the carrying value of the license costs, it is the policy of the
Company to measure impairment on the basis of the fair value of the
license costs, using a discounted cash flow technique. In the opinion of
management, there was no permanent impairment in the carrying value of the
license costs at September 30, 1996 or September 30, 1995.
The cost of the Transmedia License is being amortized on a straight line
basis over its estimated useful life of 15 years from the commencement of
operations in Australia.
(g) Foreign currency
The reporting currency of the Company is the United States dollar.
Assets and liabilities of the foreign subsidiary are translated into
United States dollars at the rates of exchange in effect on the balance
sheet date. Income and expense items are translated at the weighted
average rates of exchange prevailing during the period. Translation
adjustments are excluded from the results of operations and are reported
as a separate component of stockholder's equity.
(h) Loss per Common Share
Loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding. Common stock equivalents have
not been included because they are considered anti-dilutive.
F 9
<PAGE> 21
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
(j) Revenue Recognition
Revenues represent the retail value of food and beverages acquired from
the participating restaurants by the Group's cardholders, reduced by the
20% or 25% discount offered to cardholders. Revenues from card membership
fees are time apportioned over the period to which they relate.
(j) Cardholder bonuses
The Company operates a number of cardholder "Bonus" programs whereby the
cardholder receives a bonus of food and beverage, credited to their
account. The bonus is utilised as the cardholder uses The Restaurant Card
and is processed as an additional saving to the standard 20 % or 25%
saving offered by the Company. The bonus is expensed by the Company when
the bonus is granted to the Company Cardholder.
(k) Unearned Compensation
The Company has recorded unearned compensation for shares of restricted
common stock issues in exchange for certain consultancy and financial
advisory services. The restricted shares and the unearned compensation
have been recorded at the fair value of the shares at the date at which
they were issued. Compensation expense is recorded on a periodic basis as
the restriction on such shares expires.
(l) Advertising costs
The Company expenses advertising costs as incurred. Advertising costs for
the years ended September 30, 1996, 1995 and for the period from March 10,
1994 (inception) through September 30, 1994 were $13,370, $nil and $24,537
respectively. The Company has used direct response advertising in the past
and may use such advertising in the future. However, the Company did not
have costs related to direct response advertising campaigns during the
years ended September 30, 1996 and 1995 that should be capitalised.
(m) Use of estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities to prepare these
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
F 10
<PAGE> 22
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
2. RELATED PARTY TRANSACTIONS
On March 10, 1994, Edward J. Guinan III purchased 5,562,500 shares of
common stock in the Company. Edward J. Guinan III, the Chairman of the
Board, Chief Executive officer and Director of the Company, is also the
President, Secretary, Treasurer and a Director of Conestoga. Mr Guinan
owns approximately 73% of the outstanding common stock of Conestoga.
Conestoga assigned the Transmedia License to the Company on May 2, 1994
for the sum of $250,000, being equal to the amount of the non-refundable
advance payment previously made by Conestoga to Network under the License
Agreement.
On May 2, 1994, Conestoga and the Company completed the Conestoga/Company
Offering of 375 units, with each unit consisting of 1,067 shares of
Conestoga common stock and 4,500 shares of the Company's common stock, at
a price of $1,200 per unit. Of the $450,000 raised in the Offering,
$449,831 was paid for shares of Conestoga common stock and $168.75 was
paid for shares of the Company's Common Stock. The purchasers in the
Conestoga/Company Offering included Mr Paul Harrison and Mr Eugene A.
Cernan, each of whom purchased 41.67 units, or 133.33 shares of Conestoga
common stock and 187,500 shares of common stock of the Company for a
purchase price of $50,000. Mr Cernan is a Director of Conestoga, as well
as a Shareholder and former Director and former Officer of Transmedia
Europe, Inc. and Conestoga Partners, Inc., an entity controlled by Mr
Guinan whose sole asset consists of shares of Transmedia Europe, Inc.
The Company entered into a license agreement with Transmedia Europe, Inc.,
holder of the European license, pursuant to which the Company has the
right to use certain computer software in connection with the operation of
the Company's business. Under the license agreement, the Company has paid
Transmedia Europe, Inc. an initial license fee of $50,000, and is obliged
to an annual maintenance and support fee of 7,500 Pounds, or $12,000 using
the exchange rate at September 30, 1995 of $1.60 to (pound)1.
During the year ended September 30, 1995, the Group was charged a
corporate management fee of $156,313 by Transmedia Europe, Inc. in respect
of the Group's share of the head office expenses, comprising salaries,
rent and other associated office costs. In addition, Transmedia Europe,
Inc. has paid travel, accommodation and other costs totalling $60,742,
during the year ended September 30, 1995 ($2,467 during the period from
inception to September 30, 1994), which have been charged to the Group.
During the year ended September 30, 1996, the Group was charged a
corporate management fee of $240,267 from Transmedia Europe, Inc. in
respect of the Group's share of the head office expenses, comprising
salaries, rent and other associated office and professional costs. In
addition, Transmedia Europe, Inc. has paid travel, accommodation and other
costs totalling $122,526, during the year ended September 30, 1996
($60,742 during the year ended September 30, 1995), which have been
charged to the Group.
Amounts due from/(to) related parties consist of the following:
<TABLE>
<CAPTION>
September 30, 1996 September 30, 1995
------------------ ------------------
<S> <C> <C>
E. Guinan III $ -- $ 43,891
Conestoga Partners, Inc. 26,260 155,169
Transmedia Europe, Inc. (93,300) 416,280
P. Harrison 22,597 3,937
--------- --------
$ (44,443) $619,277
========= ========
</TABLE>
F11
<PAGE> 23
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
2. RELATED PARTY TRANSACTIONS (CONTINUED)
Information regarding the activity with respect to the amounts due
from/(to) related parties is as follows:
<TABLE>
<CAPTION>
E. Guinan III Conestoga Transmedia P Harrison
------------- --------- ---------- ----------
Partners Europe, Inc.
-------- ------------
<S> <C> <C> <C> <C>
Balance at September 30, 1994 $ -- 105,169 110,163 3,866
Additions 235,891 50,000 432,602 71
Amounts collected (192,000) -- (126,485) --
--------- -------- ---------- ------
Balance at September 30, 1995 43,891 155,169 416,280 3,937
Additions 159,978 -- 1,193,520 18,450
Amounts charged -- -- (362,793) --
Amounts collected (203,869) (128,909) (1,340,307) --
Foreign currency movement -- -- -- 210
--------- -------- ---------- ------
Balance at September 30, 1996 $ -- 26,260 (93,300) 22,597
========= ======== ========== ======
</TABLE>
The above loans are unsecured, non interest bearing and repayable on demand.
3. INTANGIBLE ASSETS
Intangible assets consist of:
<TABLE>
<CAPTION>
Formation Transmedia Hawaii Total
--------- ---------- ------ -----
Expenses Licence Option
-------- ------- ------
<S> <C> <C> <C> <C>
Acquisition cost 770 1,840,790 150,000 1,991,560
Amortisation as at September 30, 1995 -- (122,720) -- (122,720)
Foreign currency 15 -- -- 15
---- ---------- ------- ----------
Balance at September 30, 1995 785 1,718,070 150,000 1,868,855
Amortisation charge for the year -- (122,720) -- (122,720)
Foreign currency 41 -- -- 41
---- ---------- ------- ----------
Balance at September 30, 1996 $826 1,595,350 150,000 1,746,176
==== ========== ======= ==========
</TABLE>
The cost of the acquisition of the Transmedia License of $1,840,790 is
based upon a cash payment of $1,000,000, 250,000 shares of common stock
issued to Conestoga as reimbursement for a cash down payment of $250,000
made by Conestoga to Network, and the issue of 590,790 shares of common
stock at a value of $1 per share which was determined on the basis of the
issue of stock at that time. The Hawaii Option was extended to March 21,
1996 with a $150,000 cash payment to Network.
F 12
<PAGE> 24
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
Furniture and Office Computer Total
fixtures equipment equipment
------- ------ ------ -------
<S> <C> <C> <C> <C>
COST
At September 30, 1994 $63,198 35,172 32,239 130,609
Additions 13,305 11,127 25,167 49,599
Foreign currency 822 457 344 1,623
------- ------ ------ -------
At September 30, 1995 77,325 46,756 57,750 181,831
Additions 5,115 1,480 23,266 29.861
Foreign currency 4,124 2,494 2,769 9,387
------- ------ ------ -------
At September 30, 1996 86,564 50,730 83,785 221,079
ACCUMULATED DEPRECIATION
At September 30, 1994 $ 4,177 1,337 2,961 8,475
Charge for year 12,286 6,773 12,420 31,479
Foreign currency 54 17 31 102
------- ------ ------ -------
At September 30, 1995 16,517 8,127 15,412 40,056
Charge for year 9,337 6,277 19,925 35,539
Foriegn currency 880 433 708 2,021
------- ------ ------ -------
At September 30, 1996 26,734 14,837 36,045 77,616
NET BOOK VALUE
At September 30, 1996 $59,830 35,893 47,740 143,463
======= ====== ====== =======
At September 30, 1995 $60,808 38,629 42,338 141,775
======= ====== ====== =======
</TABLE>
5. ALLOWANCE FOR IRRECOVERABLE RESTAURANT CREDITS
Changes in the Company's allowance for irrecoverable restaurant credits
were as follows:
<TABLE>
<CAPTION>
Year ended Year ended
September 30, September 30,
1996 1995
-------- -------
<S> <C> <C>
Balance at the beginning of the period $ 40,418 $ --
Additions - charged to costs and expenses 79,344 40,418
-------- -------
Balance at end of period $119,762 $40,418
======== =======
</TABLE>
F 13
<PAGE> 25
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
6. ACCRUED LIABILITIES
Accrued liabilities consist of the following:
<TABLE>
<CAPTION>
September 30, 1996 September 30, 1995
<S> <C> <C>
Payroll taxes and holiday pay $ 83,987 $ 46,548
Income taxes payable 6,300 6,300
Cardholder bonuses 19,259 21,623
Tips and tax 1,082 4,926
Food and beverage provision 40,874 27,632
Professional fees 54,800 122,017
Royalties payable 9,926 9,525
Other 34,124 17,189
-------- --------
$250,352 $255,760
======== ========
</TABLE>
7. STOCK OPTIONS
Under the Company's 1994 stock option and rights plan (the 'Plan'), the
Company may grant stock options and stock appreciation rights to persons
who are now or who during the term of the Plan become key employees
(including those who are also directors) and to independent sales agents.
Stock options granted under the Plan may either be incentive stock options
or non-qualified stock options for US federal income tax purposes. The
Plan provides that the stock option committee of the board of directors
may grant stock options or stock appreciation rights with respect of a
maximum of 250,000 shares of common stock at an exercise price not less
than the fair market value at the date of grant for qualified and
non-qualified stock options.
Mr Paul Harrison, President of the Company, has been granted options to
purchase 800,000 common shares at $1 per share. These options are outside
the Company's 1994 stock option and rights plan. The per share fair value
of the stock options granted in 1996 and 1995 was $0.45 and $0.44,
respectively, on the date of grant using the Black Scholes valuation
method with the weighted average assumptions being an expected dividend
yield of 0%, a risk free interest rate of 6% and an expected life being
the remaining term of the option.
The Company has also issued warrants to purchase 497,619 shares of common
stock at an exercise price ranging from $1.40 to $1.50 per share. The
warrants have a three to five year term ending through July 2000.
-F14-
<PAGE> 26
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
7. STOCK OPTIONS AND WARRANTS (CONTINUED)
Stock option and warrant activity during the periods indicated is as
follows:
<TABLE>
<CAPTION>
Options Warrants
Number of Number of
Shares Exercise Price Shares Exercise Price
<S> <C> <C> <C> <C>
Balance at September 30, 1994 800,000 $1.00 -- --
Granted -- -- 200,000 $1.50
Exercised -- -- -- --
------- ----- ------- -----
Balance at September 30, 1995 800,000 $1.00 200,000 $1.50
Granted 40,000 $1.78 297,619 $1.40
Exercised -- -- -- --
------- ----- ------- -----
Balance at September 30, 1996 840,000 $1.04 497,619 $1.44
------- ----- ------- -----
</TABLE>
The Company applies APB Opinion No.25 in accounting for its stock options
and, accordingly, no compensation cost has been recognised for its stock
options in the financial statements. Had the Company determined
compensation cost based upon the fair value at the grant date for its
stock options under SFAS No.123, the Company's net losses would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Net loss As reported $(2,006,258) $(1,990,288)
Pro forma $(2,018,298) $(1,990,288)
Loss per share
As reported $ (0.16) $ (0.17)
Pro forma $ (0.16) $ (0.17)
</TABLE>
Pro forma net loss reflects only options granted in 1996 and 1995. The
full impact of calculating compensation cost for stock options under SFAS
No.123 is reflected in the pro forma net loss amounts.
8. LEASES
The Group leases certain office space under lease agreements.
Future minimum lease payments under non-cancellable leases as of September
30, 1996 are as follows:
Year ending September 30,
<TABLE>
<S> <C>
$
1997 80,514
1998 80,514
1999 80,514
2000 80,514
--------
Total minimum payments $322,056
========
</TABLE>
The amount charged to the consolidated statement of operations for rent
expense in the year September 30, 1996 was $44,641 (1995 :
$63,102; 1994 : $nil).
-F15-
<PAGE> 27
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
9. INCOME TAXES
Income taxes reflected in the accompanying statements of operations
differed from the amounts computed by applying the US federal tax rate of
34% to loss before taxes as a result of the following:
<TABLE>
<CAPTION>
March 10, 1994
Year ended Year ended (inception) to
September 30, September 30, September 30,
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Computed 'expected' tax benefit $(682,000) $(677,000) $(117,000)
State taxes 8,000 -- 500
Change in valuation allowance for
deferred tax assets 646,000 580,000 118,000
Effect of graduated tax rates -- -- (5,000)
Other 28,000 97,000 9,800
--------- --------- ---------
Income tax expense $ -- $ -- $ 6,300
========= ========= =========
</TABLE>
The tax effects of temporary differences that give rise to deferred tax
assets are as follows:
<TABLE>
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carry forwards $ 1,306,000 $ 648,000 $ 56,000
Pre operating costs capitalised for
tax purposes 37,000 49,000 62,000
----------- --------- ---------
Total 1,343,000 697,000 118,000
Less valuation allowance (1,343,000) (697,000) (118,000)
----------- --------- ---------
Net deferred tax assets $ -- $ -- $ --
=========== ========= =========
</TABLE>
The US Federal net operating loss carry forward at September 30, 1996 of
approximately $1.9 million will begin to expire in the year 2009. The
foreign net operating loss carry forward of approximately $2.0 million may
be carried forward indefinitely.
10. COMMITMENTS
The Company has an employment agreement effective from May 26, 1994 for a
term of three years with its Chairman. The agreement provides for salary
at an annual rate of 100,000 pounds (UK) or $156,000 using the exchange
rate at September 30, 1996 of $1.56 to (pound)1.
The Company has an employment agreement affective from May 26, 1994 for a
term of three years with its President. The agreement provides for salary
at an annual rate of 80,000 pounds (UK) or $125,000 using the exchange
rate as at September 30, 1996 $1.56 to (pound)1.
F 16
<PAGE> 28
TRANSMEDIA ASIA PACIFIC, INC.
Notes to the Consolidated Financial Statements
10. COMMITMENTS (CONT.)
Each quarter, the Company must pay to Network in cash for any sublicense
located in Australia and New Zealand developed by the Company or any
affiliate of the Company, a royalty equal to 2% of gross sales. 'Gross
sales' are the gross reduction during the quarter in food and beverage
credits. The Company will also pay Network 2% of the gross sales resulting
from any other services that Network in the future may provide to
cardholders or participating restaurants. The Company must pay Network 25%
of any moneys received from sublicensees in defined Asia Pacific regions
which are other than Australia or New Zealand. Any new licensees in the
Asia Pacific region must pay Network 25% of the sublicense fee in advance,
being not less than $250,000. Royalties charged to income pursuant to this
agreement amounted to $40,596 for the year ended September 30, 1996 (1995:
$29,564).
In order to maintain full rights under the Transmedia License (1) no
person or group of persons, without prior permission of Network, may
acquire beneficial ownership of 30% or more of the Company; (2) Edward J
Guinan III is required to maintain beneficial ownership of no less than
the lower of 20% of common stock, or 15% of the common stock (as long as
the three other largest stockholders beneficially own no more than 15% in
the aggregate); (3) the Company must commence operations (a) in Australia
and/or New Zealand within 4 months after May 26, 1994 closing date under
the Transmedia License (the 'Closing Date'); (b) in another country within
3 years after the closing date; and (c) in a second other country within
the earlier of 2 years after the first country or five years from the
closing date; (4) the Company must procure in Australia and/or New Zealand
(a) 100 participating restaurants within the first 12 months or 250
participating restaurants within the first 24 months of the full rights
under the Transmedia License; (b) 2,000 cardholders within the first 12
months or 5,000 cardholders within the first 24 months of the Transmedia
License (including those receiving cards without the payment of the
initial fee) and (c) participating restaurant renewals at the rate of 70%
per year. As at September 30, 1996 the Company has complied in all
material respects with all the covenants contained in the License
Agreement.
The Company also has other obligations under the Transmedia License
respecting business practices, use of Network software programs,
marketing, training, confidentiality and standard of performance, among
others, the material breach of any of which may result in the termination
of the full rights under the Transmedia License.
The Company was assigned by Conestoga an Option Agreement (the Option)
with Network, whereby for a period of 18 months commencing March 22, 1994,
the Company is granted an option to license the sole Transmedia Franchise
in the State of Hawaii. The option is exercisable by written acceptance
and payment of a franchise fee of a further $250,000, in addition to the
$150,000 paid in September 1995 extending the option to March 21, 1997.
11. BUSINESS AND CREDIT CONCENTRATIONS
Most of the Company's customers are located in Australia. No single
customer accounted for more than 10% of the Company's service revenues in
the period under review. No single restaurant's credit was greater than
10% of the company's total restaurant credit balance at September 30,
1996.
12. NEED FOR FUTURE FUNDING
Although the Company anticipates that its current cash, together with
revenues expected to be derived from operations, should, based upon its
internal calculations, be sufficient to fund operating, and other capital
needs for the next year, the Company will be required to seek additional
financing during such period in the event it either intends to make
acquisitions or that there are delays, cost overruns, sales declines or
unanticipated expenses. While the Company is confident that sufficient
funds will be available to meet its anticipated business expansion needs
for the next year, there can be no assurance that the Company will be able
to obtain such additional financing during such 12 month period.
F 17
<PAGE> 29
ITEM 9 - CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES
On September 20, 1996 Arthur Andersen resigned as independent auditors to
the Company. The audit report for the fiscal year ending September 30,
1995 contained a modification addressing the Company's ability to continue
as a going concern. There were no disagreements with the former
independent auditors. On November 27, 1996 KPMG were appointed as
independent auditors of the Company for the year ended September 30, 1996.
The Company did not consult KPMG prior to their appointment as independent
auditors on any issues of accounting or audit.
- 11 -
<PAGE> 30
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by Item 10 will be set forth under the heading
"Election of Directors" in the Company's definitive Proxy Statement for
its annual meeting of shareholders (the "Proxy Statement"), to be filed on
or before January 28, 1997, and is incorporated herein by this reference.
ITEM 11 - EXECUTIVE COMPENSATION
Information called for by Item 11 will be set forth under the heading
"Executive Compensation" in the Proxy Statement, and is incorporated
herein by this reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information called for by Item 12 will be set forth under the heading
"Security Ownership of Certain Beneficial Owners and Management" in the
Proxy Statement, and is incorporated herein by this reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by Item 13 will be set forth under the heading
"Certain Relationships and Related Transactions" in the Proxy Statement,
to be filed on or before January 28, 1997, which is incorporated herein by
this reference.
- 12 -
<PAGE> 31
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are being filed as part of this Report.
(a) (1) Financial Statements:
Transmedia Asia Pacific, Inc. See "Index to Financial Statement"
contained in Part II, Item 8
(a) (2) Financial Statement Schedule:
All schedules are omitted because they are not applicable or the
required information is shown in the Financial Statements or the
Notes thereto.
(a) (3) Exhibits:
10.1 (m) Master License Agreement amendment, dated December 6, 1996,
by and between Network, the Company and Transmedia Europe, Inc.
(b) Reports on Form 8-K
Resignation of Arthur Anderson as independent auditors
Appointment of KPMG as independent auditors
(c) Exhibits:
See paragraph (a) (3) above for items filed as exhibits to
this Form 10-K as required by item 601 of Regulation S-K.
(d) Financial Statement Schedules:
See paragraphs (a) (1) and (a) (2) above for financial
statement schedules and supplemental financial statements
filed as part of this Form 10-K.
- 13 -
<PAGE> 32
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized
TRANSMEDIA ASIA PACIFIC, INC.
(Registrant)
Date: December 20, 1996 /s/ Edward J. Guinan III
--------------------------------------------
Name: Edward J. Guinan III
Title: Chairman, Chief Executive
Officer and Director
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, this Report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the date indicated.
Date: December 20, 1996 /s/ Edward J. Guinan III
---------------------------------------------
Name: Edward J. Guinan III
Title: Chairman, Chief Executive Officer
and Director
Date: December 20, 1996 /s/ Paul L. Harrison
---------------------------------------------
Name: Paul L. Harrison
Title: President, Chief Operating Officer,
Treasurer and Director
Date: December 20, 1996 /s/ Walter M. Epstein
---------------------------------------------
Name: Walter M. Epstein
Title: Secretary, Director
Date: December 20, 1996 /s/ Joseph Vittoria
---------------------------------------------
Name: Joseph Vittoria
Title: Director
Date: December 20, 1996 /s/ Helene Ploix
---------------------------------------------
Name: Helene Ploix
Title: Director
<PAGE> 33
Exhibit Index
Exhibit DESCRIPTION
- ------- -----------
10.1 (m) Master License Agreement amendment, dated December 6, 1996,
by and between Network, the Company and Transmedia Europe, Inc.
<PAGE> 1
Agreement dated December 6, 1996, by and among Transmedia Network,
Inc., TMNI International Incorporated (Transmedia Network, Inc. and TMNI
International Incorporated are collectively referred to herein as "Network"),
Transmedia Europe, Inc. and Transmedia Asia Pacific, Inc. (Transmedia Europe
Inc. and Transmedia Asia Pacific, Inc. are individually referred to as "TMNE"
and "TMNA" respectively and are collectively referred to as the "Network
Licensees")
WHEREAS Network and TMNE are parties to a Master License Agreement
dated December 14, 1992 as amended (the "TMNE License");
WHEREAS Network and TMNA are parties to a Master License Agreement
dated March 21, 1994 (the "TMNA License").
WHEREAS the parties wish to enter into certain agreements set forth
herein which either directly or by operation of such agreements modify the terms
of the TMNE License and the TMNA License (collectively called the "Licenses").
NOW, THEREFORE the parties, intending to be legally bound, agree as
follows:
1. Definitions. Except as otherwise specifically defined herein,
capitalized terms used herein shall have the same meanings ascribed to them in
the Licenses.
2. Restructuring. The Network Licensees and certain affiliates of
the Network Licensees intend to enter into a corporate restructuring (the
"Restructuring") pursuant to which a holding company (herein called "New Corp.")
will be established. The Network Licensees (which may be merged into one
entity), together with any other entity to which any rights under the Licenses
are granted (collectively with the Network Licensees, the "Network Business
Entities"), and other entities that are not engaged in the "Business" will
comprise direct or indirect subsidiaries of New Corp. (New Corp. and all such
subsidiaries being referred to collectively as the "New Corp. Group"). It is
likely that New Corp. will be a publicly traded company. Subject to the terms
and conditions set forth in this Agreement, Network agrees that the
Restructuring and the establishment of the New Corp. Group will not constitute a
breach of the Licenses. Upon the completion of the Restructuring, New Corp.
shall pay to Network the sum of U.S. $250,000 which payment shall be made by
wire transfer to a bank account designated by Network.
3. Permitted Operations of the New Corp. Group. The members of the
New Corp. Group, other than the Network Business Entities, may engage in any
business or activity of any nature whatsoever other than activities which are in
competition with the "Business" under the terms of the Licenses provided that
all such non-competitive businesses and activities shall not be conducted under
the Marks; no member of the New Corp. Group shall have any liability or
obligation to Network as a result of engaging in such non-competitive
activities.
<PAGE> 2
4. Operations of the Network Business Entities. The operations of
the Network Business Entities shall be conducted exclusively in one or more
separate corporations, none of which shall engage in any business or activity
except in connection with the Business. Nothing contained herein or in the
Licenses shall prohibit the Network Business Entities from being owned by one or
more other members of the New Corp. Group.
5. Countdown Businesses. Notwithstanding the provisions of paragraph
3 above, New Corp. or a subsidiary of New Corp shall have the right to acquire
and conduct on a worldwide basis the business of Countdown, plc, Holding Corp.
("Countdown") in exchange for the payment to Network on the closing of such
acquisition of the sum of U.S. $750,000 which payment shall be made by wire
transfer to a bank account designated by Network. New Corp. and the Network
Licensees shall not permit Countdown to use the Network Business Entities' list
of Cardholders or their list of Member Restaurants in connection with any
activities of Countdown or any other member of the New Corp. Group which would
be competitive with the Business. The foregoing shall not prohibit an interest
owner of a Network Business Entity from at the same time also owning an interest
in Countdown, plc, provided that the limitation on use of the Cardholder and the
Member Restaurants list is maintained. The business of Countdown shall not be
conducted under the Marks and shall not use the system of operations described
under the term Business in Section 1.2 of the Licenses.
6. Modification of Licenses. In addition to modifications or
amendment to the Licenses resulting from the provisions or paragraphs 1 through
5 hereof, the Licenses shall be modified and amended as follows:
(i) The definition of the term "Licensees" shall be modified
to include all members of the New Corp. Group who succeed to
the interest of such Licenses by Transfer or operation of law
as permitted by the Licenses or this Agreement
(ii) Solely to facilitate transfers among members of the New
Corp Group the Licenses shall be amended to eliminate any
requirement for prior Network approval of transfers of Control
of the Licensee from any member of the New Corp. Group to any
other member of the New Corp. Group as well as to eliminate
any other restriction on transferability among members of the
New Corp. Group. In addition, the Licenses shall be amended by
eliminating Section 22.5.
(iii) (A) The first sentence of Section 1.3 of each License
Agreement shall be amended by inserting
<PAGE> 3
the words "direct or indirect (as such term is used in Section
22.3(g) hereof)" prior to the words "beneficial ownership" and
the words "other than a member of the New Corp. Group"
immediately after the words "beneficial ownership."
(B) Section 22.3 of each License Agreement shall be amended by
(i) deleting "or" at the end of each clause (e) thereof, (ii)
inserting "; or" in lieu of the period at end of each clause
(f) thereof, and (iii) inserting the following clause (g) in
each such Section 22.3:
"(g) any person or group other than a member of the New
Corp. Group shall acquire, directly or indirectly, beneficial
ownership of thirty percent or more of the equity of the
Licensee, without the prior written consent of the Licensor.
For purposes of Section 1.3 and this clause (g), a person or
group shall be deemed to acquire beneficial ownership,
indirectly, of a proportional percentage of the equity of the
Licensee by acquiring beneficial ownership, directly or
indirectly, of an equity interest in any other person which
itself beneficially owns, directly or indirectly, an equity
interest in the Licensee. The terms "acquires," "group"
"directly and indirectly" and "beneficially own" shall have
the respective meanings and usages ascribed to them under
Section 13(d) of the Securities Exchange Act of 1934, as
amended, and Regulation 13D-G thereunder."
(iv) Section 21.1 shall be amended by deleting the first
sentence thereof and substituting the following: "Licensee
covenants that during the Term of this Agreement, except as
otherwise approved in writing by Licensor, Licensee's
designated manager, who shall be approved in writing by
Licensor, shall devote sufficient time, energy and efforts
necessary for the management and operation of the Business.
(v) The New Corp. Group shall take all reasonable steps to
ensure that the Network
<PAGE> 4
Licensees shall maintain sufficient working capital necessary
to conduct the Business in the ordinary course. In this
regard, the Licenses shall be amended by adding a new
subsection (l) to Section 22.2 as follows, "(l) failure to
maintain working capital adequate to conduct Licensee's
Business in the ordinary course".
7. Permitted Operations of Network. Network may engage in any
business or activity of any nature whatsoever other than activities which are in
competition with the "Business" under the terms of the Licenses in the
Territories under the Licenses. Network shall have no liability or obligation as
a result of engaging in such non-competitive activities. Such non-competitive
businesses shall not be conducted under the Marks. In addition, Network may
establish, acquire and operate in the Territories a competitive business similar
to that conducted by Countdown provided that such competitive business shall not
be conducted under the Marks and shall not use the system of operations
described under the term Business in Section 1.2 of the Licenses.
8. Conflicts: Reaffirmation of Licenses. In the event of any
explicit conflict between the terms and provisions of the Licenses and the terms
and provisions of this Agreement, the terms and provisions of this Agreement
shall govern. Except as modified and amended hereby, the Licenses shall remain
in full force and effect in accordance with their terms.
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have duly executed, sealed and delivered this Agreement the day
and year first above written.
TRANSMEDIA NETWORK INC.
ATTEST: By:__________________________________
_____________________________ Title:_______________________________
TMNI INTERNATIONAL INCORPORATED.
ATTEST: By:__________________________________
_____________________________ Title:_______________________________
<PAGE> 5
TRANSMEDIA EUROPE, INC.
ATTEST: By:_________________________________
______________________________ Title:______________________________
TRANSMEDIA ASIA PACIFIC, INC.
ATTEST: By:_________________________________
______________________________ Title:______________________________
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 1,171,305
<SECURITIES> 0
<RECEIVABLES> 66,211
<ALLOWANCES> 0
<INVENTORY> 636,808
<CURRENT-ASSETS> 2,065,308
<PP&E> 221,079
<DEPRECIATION> 77,617
<TOTAL-ASSETS> 3,954,947
<CURRENT-LIABILITIES> 776,350
<BONDS> 0
0
0
<COMMON> 134
<OTHER-SE> 3,178,463
<TOTAL-LIABILITY-AND-EQUITY> 3,954,947
<SALES> 1,890,476
<TOTAL-REVENUES> 1,890,476
<CGS> 1,098,666
<TOTAL-COSTS> 3,917,739
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,006,258)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,027,263)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,006,258)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
